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Prestige fragrance growth slowed to roughly 3% as promotions, not price and mix, supported volume.
COTY's adjusted gross margin fell about 260 basis points as deeper discounting hurt profitability.
Coty Inc. (COTY - Free Report) is currently operating in a beauty market where demand is still present, but the ability to hold pricing is becoming more difficult. The company’s second-quarter fiscal 2026 performance points to a growing reliance on promotions to drive sales, raising questions about how much pricing power remains in the category.
This trend is most visible in Prestige. Sell-out trends remained broadly stable, but like-for-like Prestige sales still fell 2%. This gap suggests that reported sales were pressured by heavier promotions and discounting. The category backdrop tells a similar story. Prestige fragrance growth slowed from about 5% in the prior quarter to roughly 3% in the second quarter, with only modest help from price and mix. In other words, pricing was not doing much of the lifting, and volume was being supported more by promotions.
The U.S. market further highlights the issue. Growth in prestige fragrances slowed from 7% to around 3%, while promotional activity intensified during the holiday period. This combination not only put pressure on the overall category growth but also reduced profitability, as deeper discounts weighed on margins. Coty’s performance in this environment remained uneven, with sell-out not fully translating into revenue gains.
Margins reflect the same pressure. Coty’s adjusted gross margin declined by about 260 basis points year over year in the second quarter, with higher promotional intensity being a key factor. This is not expected to ease immediately, as the promotional environment remains elevated and continues to weigh on both sales and profitability.
Image Source: Zacks Investment Research
Overall, Coty is still seeing demand for its products, but converting that demand into higher-priced sales is becoming harder. The increasing need for promotions suggests that pricing power is under pressure, and that shift is starting to show up clearly in both revenues and margins. Shares of this Zacks Rank #4 (Sell) company have tumbled 34.7% year to date compared with the industry’s decline of 33.1%.
The Zacks Consensus Estimate for Ralph Lauren’s current fiscal-year sales and earnings suggests growth of 12.4% and 31.8%, respectively, from the year-ago figures.
Columbia Sportswear Company (COLM - Free Report) , which designs, develops, markets and distributes outdoor, active and lifestyle products, carries a Zacks Rank #2 at present. COLM delivered a trailing four-quarter earnings surprise of 25.2%, on average.
The Zacks Consensus Estimate for Columbia Sportswear’s current fiscal-year sales calls for growth of nearly 2%, while estimates for earnings suggest a 6.2% decline from the year-ago figure.
Kontoor Brands (KTB - Free Report) , a lifestyle apparel company, currently carries a Zacks Rank of 2. KTB delivered a trailing four-quarter earnings surprise of 13.9%, on average.
The consensus estimate for Kontoor Brands’ current fiscal-year sales and earnings suggests growth of 9.2% and 15.6%, respectively, from the year-ago figures.
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Coty Faces Promotional Pressure: Is Pricing Power Weakening?
Key Takeaways
Coty Inc. (COTY - Free Report) is currently operating in a beauty market where demand is still present, but the ability to hold pricing is becoming more difficult. The company’s second-quarter fiscal 2026 performance points to a growing reliance on promotions to drive sales, raising questions about how much pricing power remains in the category.
This trend is most visible in Prestige. Sell-out trends remained broadly stable, but like-for-like Prestige sales still fell 2%. This gap suggests that reported sales were pressured by heavier promotions and discounting. The category backdrop tells a similar story. Prestige fragrance growth slowed from about 5% in the prior quarter to roughly 3% in the second quarter, with only modest help from price and mix. In other words, pricing was not doing much of the lifting, and volume was being supported more by promotions.
The U.S. market further highlights the issue. Growth in prestige fragrances slowed from 7% to around 3%, while promotional activity intensified during the holiday period. This combination not only put pressure on the overall category growth but also reduced profitability, as deeper discounts weighed on margins. Coty’s performance in this environment remained uneven, with sell-out not fully translating into revenue gains.
Margins reflect the same pressure. Coty’s adjusted gross margin declined by about 260 basis points year over year in the second quarter, with higher promotional intensity being a key factor. This is not expected to ease immediately, as the promotional environment remains elevated and continues to weigh on both sales and profitability.
Image Source: Zacks Investment Research
Overall, Coty is still seeing demand for its products, but converting that demand into higher-priced sales is becoming harder. The increasing need for promotions suggests that pricing power is under pressure, and that shift is starting to show up clearly in both revenues and margins. Shares of this Zacks Rank #4 (Sell) company have tumbled 34.7% year to date compared with the industry’s decline of 33.1%.
3 Solid Picks
Ralph Lauren Corporation (RL - Free Report) , which designs, markets and distributes lifestyle products, currently carries a Zacks Rank #2 (Buy). RL delivered a trailing four-quarter earnings surprise of 9.7%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Ralph Lauren’s current fiscal-year sales and earnings suggests growth of 12.4% and 31.8%, respectively, from the year-ago figures.
Columbia Sportswear Company (COLM - Free Report) , which designs, develops, markets and distributes outdoor, active and lifestyle products, carries a Zacks Rank #2 at present. COLM delivered a trailing four-quarter earnings surprise of 25.2%, on average.
The Zacks Consensus Estimate for Columbia Sportswear’s current fiscal-year sales calls for growth of nearly 2%, while estimates for earnings suggest a 6.2% decline from the year-ago figure.
Kontoor Brands (KTB - Free Report) , a lifestyle apparel company, currently carries a Zacks Rank of 2. KTB delivered a trailing four-quarter earnings surprise of 13.9%, on average.
The consensus estimate for Kontoor Brands’ current fiscal-year sales and earnings suggests growth of 9.2% and 15.6%, respectively, from the year-ago figures.